Investor guidance

No loan for buying house on pugree
Q. I intend to purchase a house on pugree. Are there any loans available? The landlord is asking some amount in cash for this. For the cheque amount, will I get a housing loan? If not, then can I take a loan from my PF?

• Form 12-C
• IDBI Bank shares
• Tax benefit in US
• Off-market trade
• ITO jurisdiction

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Srinagar to become a handicraft hub. (28k, 56k)

Beijing, July 2
India’s auto giant Mahindra & Mahindra (M&M) kicked off its China operations with the rolling out of the first M&M branded tractor in Nanchang, capital of south-central China’s Jiangxi province.

“This strategic venture takes us one step closer to our ambition of becoming the world’s number one tractor manufacturer. Our combined forces with cost/quality advantage would open new markets in our quest for global dominance,” Vice-Chairman and Managing Director of M&M, Anand Mahindra said at the colourful launching ceremony.

The China operation has been launched through Mahindra (China) Tractor Co Ltd, a joint venture between M&M’s 100 per cent subsidiary Mahindra Overseas Investment Co. (Mauritius) Ltd (MOICML) and Jiangling Motor Co Group (JMCG). Mahindra (China) Tractor Co Ltd. acquired the tractor manufacturing assets from Jiangling Tractor Company, a subsidiary of JMCG last year.

The plant has a production capacity of 12,000 tractors per annum, company sources told over phone from Nanchang.

At the launch, Anand Mahindra handed over first tractor produced in the factory under the new JV to Nanchang Mayor Li Douluo and another tractor to a local farmer.

Mahindra has 80 per cent stake in the joint venture entity, and is investing $ 8 million out of the estimated total investment of $ 10 million.

The balance 20 per cent is held by JMCG, a leading group in tractors and automotive business in Nanchang. — PTI

New Delhi, July 2
With torrential rains and subsequent floods in large parts of Gujarat have brought the life in this industrial state to a standstill, besides causing a loss to the industry to the tune of Rs 10,000 crore, industry chamber Assocham said today.

As per estimates of the chamber, the loss is estimated to the extent of Rs 2,000 crore in south Gujarat as most of chemical industry in the area has stopped economic operations. The Saurashtra region has suffered loss of Rs 200 crore and agriculture, among other sectors, was badly affected.

Besides, the General Motors plant in the region has been closed as also Gujarat State Fertiliser Cooperation and IPCL, Assocham president Mahendra K Sanghi said in a statement.

Vadodara and Vapi are the other worst affected regions with losses estimated at Rs 3,000 crore. Agriculture and chemicals, fertilisers, glass, drugs and pharmaceuticals industries were also severely affected.

Mr Sanghi urged the Centre and the Gujarat government to enhance the rescue operations on a war-footing to prevent loss of human lives and deterioration of economic activities.

In Vadodara and Surat, a majority of power looms and jewellery units have been forced to close down due to floods. According to press statement of the IPCL, the company has temporarily shutdown its operating plants at the petrochemicals complex at Vadodara due to the flood situation in the Gujarat city.

The IPCL informed the BSE that this decision was in the interest of safety. The company said there was no loss of property or personnel due to flood. Meanwhile, the IPCL utilities, power and Acrylonitrile (ACN) Plant were functioning, the IPCL said.

AVIATION NOTES

When takeoff delay irked Praful Patel

Jet Airways woes continue unabated. Disturbed by allegations in the US, the airlines had another round of negative publicity at Mumbai airport when the Minister of State for Civil Aviation Praful Patel walked out of the aircraft owing to an inordinate delay.

The Delhi-bound flight was scheduled to take off from Mumbai at 10.30 pm. But the flight was held back as passengers from connecting flight had not reported. The minister walked out of the aircraft at 11.35 pm when he came to know that the pilots had not even taken the command of the aircraft.

The ground staff should have briefed the passengers properly instead of leading them to garden’s path. Nearly two years ago, the airline had trouble with another minister. — Sahib Singh.

Indian Airlines CMD

Women, who have elevated to top positions, in the mistaken notion of a stop-gap arrangement, have usually stayed put much to the chagrin of many aspirants.

This being the reality there is every likelihood of Sushma Chawla holding on to the challenging portfolio of the Chairman and Managing Director of the Indian Airlines for a longer tenure than some predict.

Having worked as a Regional Director, Director (Finance) and Deputy Managing Director, Ms Chawla is well-versed with the functioning of the airline. During her service since 1971, she has had valuable interaction with the most sought after community of pilots.

The outgoing CMD teamed up with pilots judiciously and he saw to it that the airline emerged out of the turbulent weather. Aviation bigwigs, who have good of the airlines in their scheme of thing, believe that Sushma Chawla’s continuance may bring more rewarding results than initiating any change.

On the rise

The airline industry is on the rise. More people are flying on the national and the international sectors than before although there is uncertainty on fare structure. The low cost carriers are entering the field. But the weather is not as comfortable as some over-zealous operators claim. All is not ‘honey’ in the corridors of flying because every second day there are threatening signals that ATF prices may rise further.

When skies were opened in 1990s, there were apprehensions that monopolistic IA would be swamped. But it did not happen and a majority of the private rivals died. The competition saw IA improve its services. The loss-making carrier has become a profit-making unit. The airline has potentials to further stabilise regardless of challenges and competition. Analysts feel that the airline would be on cloud nine if ‘dead wood’ is pruned away.

The next six months are vital for the airline’s health. It is not yet known when the new aircraft will join IA’s family. But in the uncertainty of new aircraft, the airline is seeking leased aircraft. As fleet increases (A 320s for IA and A-319s for Alliance Air), the airline will expand its network nationally and internationally. The capacity through leased aircraft will indeed increase but profit will not be high as it should be because interest on leased aircraft is enormous. “Beggars cannot be choosers,” said a senior IA official.

Investor guidance

Q. I intend to purchase a house on pugree. Are there any loans available? The landlord is asking some amount in cash for this. For the cheque amount, will I get a housing loan? If not, then can I take a loan from my PF?

— Dipesh Thakker

A: For purchasing house on pugree (also called tenancy rights), no institution would grant you a loan. Even if you were to take a loan, what you own is tenancy rights and not the property itself. Therefore, the tax deductions would not be available to you.

Q: I have the following query regarding tax benefit from housing loan and filling up Form-12C. My husband and I have taken a housing loan jointly. We wish to avail of the tax benefit on the housing loan interest of Rs 1.5 lakh per annum. My company has asked me to fill in Form-12C, which asks me to declare any income from sources other than my salary. Neither my husband nor me have any other source of income. Is it necessary to fill in Form 12C in that case?

— Dipti Khanna

A: Form-12C not only deals with incomes under heads other than “Salaries” it includes “Income from House Property.” You will have a loss under the head “Income from House Property” on account of interest deduction. Hence, if you want to claim the benefit for lower deduction of tax at source from salary on account of the interest paid on a home loan, you will have to fill in this form.

IDBI Bank shares

Q: You must be aware of the recent merger of IDBI Bank Ltd. with IDBI Ltd. on June 4, 2005. Kindly enlighten if capital gains need to be calculated as on this day due to the conversion of shares of the former into the latter. If not, how will the capital gains be worked out on actual sale of the shares of IDBI Ltd. subsequently, while the original purchase was made that of IDBI Bank Ltd.

— Krishna Kumar

A: As per Sec. 47(vi), any transfer, in a scheme of amalgamation, of a capital asset by the amalgamating company to the amalgamated company if the amalgamated company is an Indian company; is not considered as a transfer.

Consequently, when the shares are subsequently sold, the cost of acquisition would be the cost at which the original shares were acquired. However, for the purpose of arriving at the indexed cost, one will have to follow the principles laid down by explanation (iii) to Sec. 48. It states, “indexed cost of acquisition” means an amount which bears to the cost of acquisition the same proportion as cost inflation index for the year in which the asset is transferred bears to the cost inflation index for the first year in which the asset was held by the assessee or for the year beginning on April, 1, 1981, whichever is later.

Tax benefit in US

Q: On a house sale (by a US citizen) in India are you better off financially in a) paying the 20 per cent +10 per cent + 2 per cent capital gains tax then claiming the asset sale in the US to obtain a tax credit ‘foreign tax paid’ or b) Investing in government bonds for three years that pay 5.5 per cent? Can you claim the capital gain tax paid in India as a credit in the US?

— Mohan Mandrekar

A: The capital gain tax is payable @ 22.44 per cent (20 per cent + 10 per cent + 2 per cent) with indexation. Whether you are better off paying the amount of tax or investing the capital gain portion would depend upon the numbers involved. This would again, in turn, depend upon how long you have been holding the property and how much you paid for it etc.

Yes, you can claim the credit for the capital gain tax paid in India as a credit against the tax payable on such income in the USA as per the DTAA between the two countries.

Off-market trade

Q: I have sold some shares to one of my friend on market rate. I think it is an off-market trade and the question of STT does not arise in this case. My CA says, as you have not paid STT, so the entire LTCG would be taxable. If you have paid STT, then it is tax –free while STT is not possible in my case as it is an off-market trade. Please suggest.

— Pawan Mishra

A: Your CA is right. LTCG is tax-free only if the transaction is carried out on a recognised stock exchange and STT is paid. For off -market trades, LTCG will have to be paid.

ITO jurisdiction

Q: So far I used to submit my income tax returns in Thane city office. But this year, I have changed my residence from Thane to Mumbai city. Please note that both these Thane and Mumbai fall under different Tax Commissioner’s jurisdiction. Please advise where I have to submit this year’s income tax returns.

— Umesh Karkera

A: U/s 124(1), where … the Assessing Officer … shall have jurisdiction —

(a) In respect of any person carrying on a business or profession, if the place at which he carries on his business or profession is situate within the area, or where his business or profession is carried on in more places than one, if the principal place of his business or profession is situate within the area, and

(b) In respect of any other person residing within the area.

You will do well by making an application to the Department for transferring your file to the new jurisdiction.

You can also continue to file your returns from the old jurisdiction, if it is convenient for you to do so. In practice, you will find that the department will handle your case properly.

The author may be contacted at wonderlandconsultants@yahoo.com